You are considering purchasing a restaurant franchise. You have projected that the franchise will earn $120,000...

 

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You are considering purchasing a restaurant franchise. You have projected that the franchise will earn $120,000 in profits the first year, and that those profits will grow 19.1% per year for the next 5 years, 10.9% per year for the 4 years after that, and 6.3% per year for every subsequent year. You also project that you will own the franchise for a total of 20 years, at which point you will be able to sell it for $7,670,000. If you need the investment to return at least a 13.7%, what is the most you will be willing to pay for the franchise? (20 points total) You are considering purchasing a restaurant franchise. You have projected that the franchise will earn $120,000 in profits the first year, and that those profits will grow 19.1% per year for the next 5 years, 10.9% per year for the 4 years after that, and 6.3% per year for every subsequent year. You also project that you will own the franchise for a total of 20 years, at which point you will be able to sell it for $7,670,000. If you need the investment to return at least a 13.7%, what is the most you will be willing to pay for the franchise? (20 points total)

Answer rating: 100% (QA)

To determine the maximum amount you should be willing to pay for the franchise well need to calculate the present value of all the projected cash flow... View the full answer